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Statement on Debswana's change of asset management strategy and non-renewal of contracts for Original Equipment Manufacturers (OEMs): Barloworld Equipment, Komatsu, Kanu Equipment and Epiroc

Following a press conference by the Botswana Mine Workers Union (BMWU) on 26th April 2022, Debswana Diamond Company has become aware of widespread media reports alleging the termination of contracts for some of Debswana's Original Equipment Manufacturers (OEMs). Whereas we do not believe that it was with wilful intent, we do note that the conference raised some matters that are not entirely accurate as carried in different media platforms hence require clarity. Debswana therefore wishes to put the matter into its proper context as follows.

 

Change of Asset Maintenance Strategy

​As part of the implementation of our Efficiency and Productivity Improvement strategic intent across our operations, a review of the equipment maintenance strategy at the Jwaneng mine was conducted. Emerging from that review was the decision to insource the maintenance of mining equipment at the mine through a hybrid model. This consequently means that Debswana will take over the responsibility of maintenance of the equipment through a hybrid model which entails insourcing in partnership with citizen companies but continue with the affected suppliers on a different procurement model and different requirements. In summary, the affected suppliers will no longer provide maintenance services but will continue as suppliers of spares and product support. This change of maintenance strategy is driven by several factors, and key amongst them is the need to lower operating costs in response to unpredictable market conditions, as well as the long-term vision to create value driven efficiencies within the business.

 Status of Contracts for affected OEMs

Contrary to the reported statements made that Debswana has terminated the contracts of the affected companies, namely, Barloworld Equipment, Komatsu, Kanu Equipment and Epiroc, we wish to clarify that no contract was terminated, but rather that these are contracts that have naturally elapsed, and Debswana has sought to not renew. In fact, the contracts for Komatsu and Barloworld Equipment both elapsed on 31 March 2021, whilst Kanu Equipment elapsed on 30th April 2021. Epiroc Botswana contract will end on 31 May 2022. Following the lapse, Debswana has during the interim period to date been conducting business with the Business Partners on a Purchase Order basis whilst determining the way forward. All due process has been followed in terms of keeping the Business Partners informed during this time.

Debswana's response to implications of job losses within the affected companies

It is important to note that Debswana has fulfilled its obligation where the supplier contracts are concerned, therefore there is no liabilities on our part regarding any imminent job losses that may arise from the suppliers' decisions. Nonetheless, as a company we are aware that a re-arrangement of this nature may cause some concerns around potential job losses.  Debswana remains committed to continuously and actively managing the impacts of our business activities and decisions on our communities. Therefore, to minimize potential job losses, as a result of this change in strategy, Debswana will ensure that contractor personnel, affected by this decision, are prioritized in whatever model will be selected for providing the maintenance service. We wish to however caution that this is not a guarantee that all affected employees will be absorbed. Hiring will be made according to job requirements and all necessary processes will be undertaken.

The effective date to move to the new maintenance strategy is 01 July 2022.